Foursquare, Groupon: Square Has You in Its Crosshairs

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I was up the other day at St. Mary’s Square in downtown San Francisco at lunchtime looking for a place to eat. A handful of lunch trucks where parked on the square and the rare sunny day had lured folks out of their cube farms to eat fine grub and loll in the warmth for a brief respite. I wanted a square but couldn’t find anyone who took Square. By that, I mean a wonderful credit card reader that plugs into iPhones and Android phones and can turn them into a full fledged POS system.

Why am I mentioning this? Square is on a roll. The company is now handling $11 million in transactions each day. The majority of those transactions are coming from small businesses who love the simplicity of the system. Square is not the cheapest way to take credit cards but it is probably the fastest. And part of that roll is the announcement of customer loyalty programs wrapped into their existing POS platform. This is pretty dang nifty.

Now, any food truck or street merchant who takes Square payments (with all major credit cards, of course) can now mount a top-quality loyalty campaign that rewards regular shoppers and can tell them who they should give offers to, as well. This puts Square in an interesting position. Foursquare, Groupon, and a host of other companies are planning to launch loyalty tools (Foursquare has launched some loyalty campaigns but has not rolled out high-powered merchant loyalty tools yet). Google has purchased loyalty system startups (Punchd) that rely on mobile phones as their  loyalty card.

I personally think Square is going to be a real winner. Here’s why. In a world that is increasingly frictionless, a loyalty program with Square perhaps has the least friction of all. On a smart phone, a loyalty app has to compete with other smart phone loyalty apps for user and merchant mindshare. Adoption in a highly fragmented market is hard. Square faces no such adoption problems. Users do not need to sign up for its loyalty program. They just need to buy something from a merchant.

What’s more, Square’s specific way of interacting with people who use credit cards is ripe for relationship marketing. One of my favorite things about Square is that I can request a receipt be emailed to me. This is, essentially, a direct channel with an explicit opt-in. And it’s a fabulous vehicle for delivering loyalty program pitches and the like. Further, this program lops off half of the adoption problem with most loyalty programs by tying itself directly to a customer credit card rather than to some other form of account.

Granted, other loyalty apps can very easily ask for credit card numbers or other unique identifiers. And, surely, the credit card companies themselves have grand plans around this. Witness the powerful and ingenious Shop Small Business campaign currently running with American Express that gives a $25 credit to shoppers using a registered AMEX card at one of the registered small businesses in their areas.

But with Square, there is no ask from the buyer, who has already decided to give that merchant their credit card. There is just the offer to the buyer. Period. It can either be opt-in or not. No one gets angry when you try to give them a nice discount.

I finally did find a food truck up at Saint Mary’s Square who took Square. I bought a nice lunch plate and offered up my plastic. The chef / truck owner took my card, rang it through, and then handed me a receipt to sign. After I signed, he gave me a card with the name of the truck and 10 punch slots around the edges. “Eat here 10 times, and next time your meal  is free,” he told me.

I smiled, knowing I would lose that card within the week but hopeful that in the near future the interaction would be different. It might sound more like this. “Hey, this is your fifth lunch here in the past two months. If you eat five more, we’ll give you the 11th totally free of charge? How does that sound?” Pretty sweet, would be my reply. A Square deal.


Alex Salkever’s Personal Fight column appears every Friday on Street Fight.